Monday, November 03, 2008

Insanity is doing the same thing over and over again...

...and expecting different results.

Back in February of 2003, faced with decreasing profits, Circuit City fired the highest-paid 10% of its workforce. Some of them made between $30,000 and $100,000. This may seem like a lot for an electronics salesperson, but to make that type of money, you had to be very, very good. That's because at the time, Circuit City paid its salespeople on strict commission. So, universally, these workers were its most profitable employees. Many of these were also the most knowledgeable salespeople, although this was not universal.

I was one of them. Fortunately, I was already planning for law school when I got the news.

Circuit City decided that it could replace highly trained, highly skilled salespeople with new, untrained people off the street. This, of course, is stupid. Replace "salespeople" with "ophthalmologists" or "mechanics" or "teachers" and you'll see why. Not everyone can do sales. It's a skill that requires both natural ability and training.

Needless to say, the plan didn't work. Upper Management tried explaining why the strategy didn't work. They didn't list "faulty premise" as one of the possibilities. In mind-numbing futility they tried it again. And again.

It didn't work any better than the first time, although it may not have hurt as much as the first bloodbath. Most of the truly talented salespeople didn't make it past February of 2003. The remnants that were cut off later were less effective in the first place, so they weren't missed as much.

Which leads us to today. Circuit City's stock price is so low it's now in danger of being delisted from the NYSE. In a related story, they're going bankrupt. For what it's worth, I'd like to take this opportunity to say, "I told you so."

Best Buy shouldn't gloat though. Big Box electronics retailers are marching toward extinction. To quote one of my favorite movies, "They're all dead. They just don't know it yet."